47% of retailers cannot accommodate the rising cost of doing business, a survey from Retail Excellence Ireland (REI) suggests.
REI, the largest representative body for the retail industry in Ireland, warned that the industry is facing mass closures if the government does not intervene on rising costs and introduces a lower rate of VAT.
Rising Costs
The costs of running a business have been rising in recent years due to factors such as high interest rates and legacy tax debt.
Most recently they have been exacerbated by the Red Sea crisis leading to supply chain issues and punitive labour costs, such as the recently increased minimum wage and statutory sick pay.
These costs will be further intensified by new EU legislation on repayment terms which requires firms to repay all invoices within 30 days of receiving them. This move is set to be introduced in the coming months.
Additional administrative requirements such as Revenue’s enhanced employer reporting present an additional burden for businesses.
The survey by REI suggests that 83% of businesses have already made changes to their operating model, such as raising prices or reducing hours, to fight rising costs.
It also found that 72% of businesses have seen an increase in employee sick leave since the introduction of statutory sick leave.
The same proportion (72%) believe current economic policies will disrupt their business in the coming year.
According to the survey, almost half (46%) of businesses are seeking a reduction in VAT to help with costs.
‘Over The Brink’
Speaking about the survey results, the chief executive of REI Jean McCabe said, “The Government is mistaken if it believes that hard-pressed retailers can absorb a series of rapidly mounting labour costs, punitive repayment terms, and ongoing supply chain issues – and still remain in business.”
She pointed out that the retail industry employs close to 10% of the Irish workforce, and that many businesses are in danger of closing their doors due to the volume of costs.
“When there is one or even two additional costs, it can be tricky but ultimately most retailers can manage. But we are talking about multiple prohibitive costs now.”
McCabe continued, “The vast majority of retailers in Ireland are SMEs (small and medium-sized enterprises) that do not have the kind of balance sheets that can absorb these cost increases.
“Many are operating month to month and this economic environment will push many over the brink.
“We need to see major intervention as an urgent priority from the Government.”
The REI Cost of Doing Business Survey was conducted last month among 128 retail companies, which represent approximately 3,000 stores nationwide.
Read More: Budget Fails To Address Impact Of Rising Business Costs On Retailers
